Cash transfer may just be transferring leakage, not plugging it

The government on Tuesday launched its scaled down direct cash transfer in 20 districts, including two in the national capital.

The government seems to be approaching its game-changer scheme cautiously, as Planning Commission Deputy Chairman Montek Singh Ahluwalia defended the watering down of the initiative saying the phased roll-out was aimed at demonstrating the feasibility of the technology.

The government undertook 1,980 transactions transferring over Rs 35.45 lakh into accounts. Reuters

"It is good that the scheme is being launched in a phased manner ... Let us demonstrate that the technology works," he was quoted as saying in a PTI report.

The states and Union territories (UTs) where the scheme was launched were Karnataka, Andhra Pradesh, Delhi, Rajasthan, Madhya Pradesh and Punjab and UTs of Puducherry, Chandigarh and Daman and Diu.

According to a report in the Economic Times, the government undertook 1,980 transactions transferring over Rs 35.45 lakh into accounts of beneficiaries with Aadhaar or Unique Identity numbers.

The total amount transferred, however, is not known because there were beneficiaries who did not have Aadhaar numbers yet.

Though the earlier plan was to make Aadhaar mandatory for cash transfer, the government on Monday said it is making a compromise on this.

"Over the next few days or weeks, we will aim at 100% penetration of Aadhaar beneficiaries...whether there is Aadhaar card or not money will be credited, money will be withdrawn," Finance Minister P Chidambaram said at a press conference.

The compromise seems to be a recipe for disaster as transferring cash without any identity is likely to undermine the very objective of the scheme-plugging the leakages.

In that case, the government is just handing over a stick to the critics of the scheme.